Rehda calls for lowering of house prices following construction tax exemption

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PETALING JAYA: Real Estate Housing Developers’ Association Malaysia (Rehda) president Datuk Soam Heng Choon called on the developers to adjust the pricing of the houses to reflect the savings brought on by the government’s recent policy changes.

He said the organisation would present their case on the price savings to the government before the announcement of the Federal Budget in November.

In the CEO Series 2018: Annual Property Developers Conference organised by Rehda Institute today, Finance Minister Lim Guan Eng said the exemption of Sales and Service Tax (SST) for construction services should benefit the public, especially the buyers in the residential housing market.

He added that the government would reconsider the exemption should the savings of input costs have not resulted in a reduction of house prices.

Greater homeownership in Malaysia

 

Meanwhile, Lim also said that the government intended to promote greater homeownership in Malaysia through the encouragement of income growth. Currently, the national median household income indicated that the price ranges for affordable housing in Penang and the Capital are approximately RM300,000 and RM400,000 respectively.

In a presentation earlier, CIMB Bank group chief economist Dr Donald Hanna said that the imbalance of supply and demand in the property market have increased since 2015.

“Between the year 2007 to 2016 (a period of ten years), the housing price increased by 10% compared to the income growth of 8%,” said Donald.

The mismatch between the prices of new launches and the household (un)affordability has led to a large number of unsold units.

The property priced RM250,000 and above made up the majority of the overhang.

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Loan problems

In his opening keynote speech, Rehda Institute chairman Datuk Jeffrey Ng shared that the top three reasons of the unsold residential units in the Malaysian market were due to the difficulties of obtaining end financing, the unreleased bumiputra quota and a weak market

“The housing industry needs positive interferences to create a more vibrant market,” added Ng.

According to CIMB Research, the market now sees moderate growth in residential mortgage, as it registered 8.3% year-on-year (yoy) growth at end-June 2018 compared to 8.9% yoy at end-March 2018.

The overall loan growth in Malaysia is expected to slow following the fall in automotive sales and consumer spending after the introduction of SST.

The finance minister cited the high loan rejection rate as one of the reasons for prospective house buyers being unable to secure financing. This situation has also resulted in some low-cost houses in Penang remaining unoccupied despite the high demand for such housing.

Lim added that the government had talked to the Bank Negara Malaysia (BNM) and the Bank is reassessing the lending guidelines.

On foreign homeownership and workers

Meanwhile, Lim said that the government welcomed projects built for both locals and foreigners, but they would discourage townships built exclusively for foreigners.

In his speech, he announced the extension of the maximum period of stay for skilled foreign workers.

Skilled workers will be able to stay in Malaysia for an additional three years, bringing the length of time from 10 years to 13 years. The extension will incur an annual levy of RM10,000, in which 80% will be borne by the employee and 20% by the employers.

However, in the later panel discussion session, Master Builders Association Malaysia (MBAM) president Foo Chek Lee urged the government to review the policy. He said it is unrealistic for a skilled foreign worker to spend RM600 to RM700 per month to secure a job in Malaysia.

An inflation hike expected in 2019

The CPI inflation for 2018 is projected to dip below the baseline of 2.3% following the removal of GST and the fuel subsidy, according to Sunway University Business School professor of economics Prof. Dr Yeah Kim Leng.

However, the inflation rate is expected to slightly increase above 2.3% in 2019 due to the higher price of crude oil, implementation of SST, weak ringgit and a stronger demand-pull pressure.

“The current account surplus is unlikely to drop despite the cancellation or postponement of mega infrastructure projects.

“The projected GDP growth in Malaysia from 2018 to 2019 also remained at a healthy rate of 4.5% to 5.5%,” said Yeah.

Others speakers included InvestKL Corporation chairman Datuk Seri Michael KC Yam, PNB Merdeka Ventures chief executive officer Tengku Datuk Abdul Aziz Tengku Mahmud and more.

 

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